An extremist, not a fanatic

March 27, 2013

Why is the middle squeezed?

Hopi points to the paradox that whilst some of the left is talking more stridently, actual trades union militancy, as measured by strikes, is very low. A new paper highlights this disjunct between the political and industrial spheres.

Martina Bisello shows that there has in recent years been a job polarization; employment has grown in both well-paid and badly-paid jobs at the expense of middling occupations. She attributes this to the IT revolution which, along with other technical changes, has had three effects:

- it has displaced routine white-collar clerical workers.

- it has increased demand top-level employees who analyze and manage data.

- in permitting direct control of many manual workers, it has reduced the efficiency wages these receive, and this relative wage fall has helped sustain demand for such employees.

Granted, this process hasn't all been bad for middle-income earners, as many, like Joan Harris a generation earlier, have moved up the occupational ladder. Nevertheless, it suggests that the squeeze on middle incomes has a basis not just in the macroeconomics of stubborn inflation, but in changes in the technical-industrial base.

This fact, however, is scrupulously ignored by the Labour leadership, which thinks of the "squeezed middle" as a purely political rather than industrial problem. To paraphrase Marx, Labour inhabits the "very Eden of the innate rights of man" that is the sphere of commodity exchange, and never troubles itself to consider the "hidden abode of production". The industrial and the political realms are thus separated.This surely represents a triumph of the Thatcherism which asserted "management's right to manage".

And herein lies my concern. Marx was surely correct to point out that a strategy that never inquires into the hidden abode of production is unlikely to succeed intellectually. So can it succeed politically?

Why is the middle squeezed? Most of the discussion about this issue ignores the role of demand. (Richard Florida is a rare exception with his recent piece in the Chronicle of Higher Education.)

Over the last several decades the demand for leisure and hospitality services and for healthcare, particularly low-paid healthcare such as care in the home, has increased steadily. The demand for manufactured goods has decreased in relative terms.

Given the increase in demand for low-productivity services and the corresponding decline in demand for high-productivity manufactured goods, it's hardly surprising that both productivity and wages are stagnating.